Are we allowed to talk about Bitcoin?

He isn't the shmuck in this, though.

You are right that his BS persona is all about valuation and not overpaying for equity in companies.

And with all that, it's also true he clearly did no due diligence on FTX or their ridiculous token that he accepted payment in. But not a penny of his own money was actually lost here. He lent his name to them, and what he lost was some of his payment for his celebrity endorsement, which went poof because he was partially compensated with equity in the company and with overvalued digital tokens that are now worthless. I hope in the bankruptcy, they try to clawback anything he actually took out of the deal, because I suspect there was money beyond what he is claiming he lost that he took in cash.

It's also worse, probably, because they were likely paying him with FTT, then marking the token to market at the valuation he accepted payment for it at, and then turning around and representing to others who they sucked in that that was the market value of FTT. So in a backward-ass way, he was part of the problem; he contributed to the insane valuation on FTT, which was being margined by FTX and Alameda to trade with, and it was that margin that was their undoing.

These things always seem so insane after they unravel, the thing about it is that in the era of QE and ZIRP, I could have guaranteed you that things like this have proliferated all around us. You just don't know where the naked swimmers are until the tide starts to go out.

 

FYI, they flipped the CEO of Alameda (the Harry Potter woman and SBF's former girlfriend) and a low-profile co-founder of FTX. Both are pleading guilty to fraud charges and are cooperating in the case against SBF.

https://www.cnbc.com/2022/12/22/ftx...ral-charges-cooperating-with-prosecutors.html

 

More contagion.

Silvergate Tumbles After FTX Implosion Prompts $8.1 Billion Bank Run

 

This video is fun for all kinds of reasons.

It was Peter Shiff predicting the Cubs were going to win the World Series. ... and like Kreskin, knowing in pretty prescient detail why it would happen and exactly how it would play out.

This was when Bitcoin was just off that peak of $68K.

Celcius (now bankrupt, $4 billion + of customers' money gone; the NY AG woke up a day ago to the publicity she can get out of it by filing suit, etc.) was promising people ridiculously high yields to hold their bitcoin with them. ... in a zero interest rate environment.

Of course, it was that zero interest rate environment -- savers being robbed of their safe yield by a central bank that acts like it is creating prosperity and never backtracks to account for the disasters it leaves in its wake -- that made what should have been an obviously reckless and risky proposition look so attractive to so many people.

Kevin O'Leary came up on this thread recently. ... If you play it till the end, his commentary about that is funny.

 

Coinbase to cut 20% jobs, abandon 'several' projects to weather downturns in crypto market

It's the second round of layoffs.

FYI, the stock is down more than 90 percent from its IPO price.

Here I was predicting the Cubs were going to win the World Series. ... when people on here were talking about whether or not to buy the stock when it went public, and I was trying to say that the valuation was crazy even by the standards of cheap money bubbles, and trying to warn that a lot of people were going to get hurt when the artificiality eventually ended.

 

Oy. I don't have the bandwidth right now to get into why. But SBF is not doing himself any favors.

FTX Pre-Mortem Overview

 

Risk-on rally. It's not just bitcoin. It's equities, high-yield debt, etc. Basically everything that is bubbled up and had been getting hit hard.

There was a CPI report released on Thursday, and the takeaway was that the inflation the Fed has ostensibly been fighting has stabilized (up 6.5 percent on the headline number year over year, but down from the 7.1 percent rise in November).

The bond market has been betting that the Fed can't go much further in its tightening without breaking things. And sentiment has now shifted to, "Now they will have the excuse to turn tail and start injecting liquidity again." Markets are betting that they can't go much further without something systemic breaking (we can't afford normalized interest rates without bringing about a credit crisis), so they are going to inevitably have to step back in with more interest rate suppression, possibly more asset purchases, etc. It's kind of fascinating to watch. A stream of Fed officials has been talking tough, intimating that they are going to raise to at least 5+ percent on the overnight rate and keep rates there for a sustained period of time. The bond market is not buying it and is pricing in much lower rates. The Fed has no control, and if the past is prelude to the present, the market will be dictating what happens to the Fed, not the other way around.

Combine the CPI report on Thursday with everything being really oversold on a relative strength basis and you got some rallying of beaten up things to end the week, including bitcoin. We'll see how what kind of legs it all has.

The Fed doesn't meet again until January 31 / February 1, so the attention has now shifted to earnings season. The bank earnings started yesterday, and they all gave very weak forward guidance, with expectations of a recession (due to the tightening the Fed has done), and they are all putting aside billions of dollars to cover loan losses for defaults.

But after an initial sell off in their stocks, we got a V-shaped rally to end the week. The typical grinding, euphoric buying we have gotten in the era of Fed-controlled markets. And it started to build a head of steam, and to reinflate bubble world a little, including in bitcoin.

All that matters is the Fed. If they keep tightening (and they are still telling markets no, they mean it this time. Markets are laughing at them and assuming its jawboning, but actions won't match the rhetoric. ... this has been everyone's experience for more than a decade), bitcoin and all the other bubbled up assets will ultimately get slaughtered. They are all down a lot from their peaks, but they are still insanely overvalued. If the Fed puts it foot back on the scales of finance (the expectation), then the short-term sentiment you are seeing right now will have been correct and maybe they can reinflate the bubble. Of course, that risks 1) high inflation becoming entrenched, and 2) an even bigger credit crisis (which is an inevitabilty due to their recklessness) down the line. Either way, it should be an interesting 2023.